Why You Should Care That A Tiny Company Is Entering The Ultra-Rare Disease Market

Matthew Herper
,
Forbes Staff
I cover science and medicine, and believe this is biology's century.

It’s impressive that Agios, of Cambridge, Mass., has raised a total of $261 million before its first experimental medicine has even begun testing in human beings. But the 70-person startup’s next step may be an important signal for the entire biotechnology business.

Most of Agios’ cash comes from its focus on how to fight cancer by attacking cell metabolism, the way cells use and regulate industry. Its scientific founders, all members of the prestigious National Academies of Science, include experts who helped discover the PI3 kinase mechanism that is a key drug target for companies like Merck and Pfizer.

Agios previously raised $33 million in venture capital from firms including ARCH Venture Partners, Flagship Ventures, and Third Rock Ventures for its anti-cancer efforts, and notched a deal with biotech giant Celgene that has resulted in another $150 million. All that was focused on its anti-cancer work.

But today the company is announcing an expansion in its scope and another $78 million from existing investors and several new ones, which the company says it cannot disclose but which are “three large, public investment funds.”

Its new focus: “inborn errors of metabolism,” the same kinds of rare diseases that helped make Genzyme into a biotech giant before it was bought up by Sanofi-Aventis for $20 billion, and which have provided a market for companies such as BioMarin and Shire.

These diseases are appealing to drug companies because, although they may only afflict only hundreds of people, governments and insurers are willing to pay prices upward of $200,000 per patient per year for medicines that effectively treat them.

Drugs for cancer seem to have hit a price ceiling of about $100,000 per patient per year. Yesterday, Incyte Pharmaceuticals announced that it would be charging just $7,000 a month ($84,000 a year) for its new pill against myelofibrosis, a rare malignancy that causes enlarged spleen.

Rare disease drugs have seen no such limits – one company, Alexion Pharmaceuticals, is charging $500,000 for the average patient. And as a result, Alexion and another rare disease company, Questcor Pharmaceuticals, have been the best-performing biotechs of recent memory. (All these prices, for both cancer drugs and rare diseases, are what governments insurers are charged; companies put programs in place to help individual patients afford medicines.)

Agios’ bet is that this trend will continue, and that the right rare disease drug can still maintain a high premium.